New U.N. Report: World’s Top 3,000 Companies Created $2.2 Trillion in Environmental Damage

A new, unreleased report eight years in the making and funded by the United Nations Principles for Responsible Investment Initiative and the United Nations Environment Programme (UNEP) will examine the business activities of world’s 3,000 biggest public companies and their impact on environments. According to The Guardian (UK), the report will argue these firms contributed $2.2 trillion in environmental damages in 2008 alone. Additionally, if these firms were truly held financially responsible for the costs associated with pollution, it would “wipe out more than one-third of their profits.” All 500 companies on the Standard & Poor index were included in the report.

The report may help highlight the growing cost of free corporate access to a range of environmental public goods. The Guardian says the report is integral to international efforts to put a “price on global environmental damage,” which could help create arguments for removing billions in subsidies for polluting industries or inefficient business practices. Richard Mattison of Trucost, authors of the report, told The Guardian: “What we’re talking about is a completely new paradigm. Externalities of this scale and nature pose a major risk to the global economy and markets are not fully aware of these risks, nor do they know how to deal with them.”

According to Trucost, much of the unquantified environmental costs were linked to GHG emissions, which are now widely understood as the primary causes of climate change. Local air pollution in the form of particulates and the over-use and pollution of fresh water were seen as other unpaid environmental costs. A number of key sectors are seen as doing more heavy damage to the environment — firms include power companies and metal producers. “Heavy water users like food, drink and clothing companies are also likely to feature high up on the list.” The final report will also cover the cost of firm’s toxic waste practices, as well as consumer damage to the environment.

Mattison argues governments need to end the free ride. “Whether they actually have to pay for these costs will be determined by the appetite for policy makers to enforce the ‘polluter pays’ principle. We should be seeking ways to fix the system, rather than waiting for the economy to adapt. Continued inefficient use of natural resources will cause significant impacts on [national economies] overall, and a massive problem for governments to fix.” Environmentally-minded investors can help encourage companies to collaborate in this process. “One of the things investors can do is engage with companies in a collaborative way,” he said to The New York Times’ Green Inc blog.

Trucost also said changing major corporation’s supply chains was going to be a major challenge. However, one that may become easier as natural resources run out in many parts of the world. One investor lobby group says that agricultural companies shed 20,000 jobs and lost $1 billion due to water shortages in California alone.